HITECH’s Health IT Investments in California

by Helen Pfister and Sandra Newman, Manatt Health Solutions
HITECH’s Health IT Investments in California

Part One of this two-part issue brief looks at how federal stimulus funding has been allocated in California for several health IT initiatives, including Medicare and Medi-Cal "meaningful use" incentive programs, regional extension centers and health IT work force training.

The Health Information Technology for Economic and Clinical Health, or HITECH, Act — part of the American Recovery and Reinvestment Act of 2009 (ARRA) — allocated approximately $36 billion to a broad range of health information technology initiatives.

Part One of this two-part issue brief summarizes how ARRA funds for health IT initiatives have been allocated in California for:

Medicare and Medi-Cal EHR Incentive Programs

Both Medicare and Medi-Cal, California’s Medicaid program, will provide financial incentives to eligible hospitals and eligible professionals who achieve meaningful use of certified EHR technology. However, while eligible hospitals may receive both Medicare and Medi-Cal incentive payments, eligible professionals can receive either Medicare or Medi-Cal incentive payments, not both.

States’ Administration of the Medi-Cal EHR Incentive Program

While Medicare EHR incentives are administered at the federal level, Medi-Cal EHR incentives are administered at the state level. States must administer their EHR incentive programs within federal guidelines and subject to oversight by CMS.  As part of their administration of EHR incentive payments, states must track Medicaid providers’ meaningful use of EHRs, conduct oversight of their incentive programs and pursue initiatives to encourage adoption of certified EHR technology to promote health care quality and the exchange of health care information.

To receive federal funding to administer their EHR incentive programs, states must submit two documents that support planning and implementation funding requests: the HIT Planning-Advanced Planning Document (P-APD) and the HIT Implementation-Advanced Planning Document (I-APD). They also must prepare a State Medicaid Health IT Plan (SMHP), which communicates to CMS the process a state will use to implement and oversee its EHR incentive program.

To launch its Medicaid EHR incentive program, a state must have an approved I-APD and SMHP. On Dec. 9, 2009, CMS announced that California would receive $2.48 million for planning activities requested under its P-APD.  However, California is still in the process of preparing its I-APD and SMHP. State officials have signaled their intent to begin Medi-Cal’s EHR incentive program in 2011.

Incentive Payments to Medi-Cal Eligible Professionals & Hospitals


Eligible Professionals:

Physicians, nurse practitioners, certified nurse midwives, dentists and physician assistants working in Federally Qualified Health Centers (FQHCs) or Rural Health Clinics (RHCs) that are led by physician assistants are eligible for Medi-Cal EHR incentive payments. Health care professionals wishing to take advantage of Medi-Cal incentives must not be hospital-based and must have a patient population of at least 30% Medi-Cal patients.

Exceptions include pediatricians and professionals practicing in FQHCs and RHCs. Pediatricians may have 20% Medi-Cal volume; payments are reduced in concert with this lower threshold.  Professionals practicing in FQHCs or RHCs may have 30% “needy individual” volume, which includes Medi-Cal patients, Healthy Families patients and patients that are furnished uncompensated care or services at either no cost or reduced cost based on a sliding fee scale.

In a 2009 landscape assessment that analyzed California providers’ eligibility for Medi-Cal EHR incentive payments (based on national program eligibility policies that the federal government included in its proposed meaningful use regulation), the California Department of Health Care Services projected that approximately 20% (around 10,000) of Medi-Cal health care professionals would be likely to meet the volume thresholds, as follows:

Among the 7,900 physicians, DHCS projected that pediatricians and OB-GYNs would be more likely to meet the volume threshold than primary care providers and other specialists. 

Breaking out the above eligible professionals by practice segment, DHCS estimated that approximately 3,200 professionals working in FQHCs and approximately 2,100 providers in private practice would meet patient volume requirements. However, these estimates were based on the eligibility requirements included in the proposed regulation. The final meaningful use regulation narrowed the definition of hospital-based professionals (who are excluded from the EHR incentive program) to those who furnish substantially all of their services in inpatient or emergency department settings. Thus, it is anticipated that a greater number of eligible professionals will qualify for the Medicaid EHR Incentive Program, although updated projections are not available at this time.


Eligible Hospitals:
 Acute care hospitals (including critical access hospitals) with at least 10% Medicaid patient volume, as well as children’s hospitals (no Medicaid volume requirements) are eligible for Medi-Cal EHR incentive payments. After issuance of the proposed rule, DHCS projected the numbers of eligible hospitals to include:

These 242 hospitals reflect approximately 93% of Medi-Cal discharges. However, because they were based on the proposed rule, these projections do not include critical access hospitals.

Eligible professionals can receive up to $63,750 in incentives over six years to support EHR adoption efforts. Eligible hospitals can receive incentives equal to their Medicaid share (based on Medicaid fee for service and managed care inpatient days) of a $2 million base amount plus graduated per-discharge payments ($200 per discharge for the 1,150th through 23,000th discharge). The incentive payments increase relative to the amount of charity care provided by the eligible hospital.

DHCS projected that, in total, if all eligible hospitals and eligible professionals received full incentive funding, it would add up to $1.4 billion. Again, however, these projections were based on eligibility criteria set forth in the proposed rule and have not been updated to reflect the inclusion of critical access hospitals and the change in the definition of hospital-based professionals which were included in the final rule. Projections for California Medicare providers are not available.

Regional Extension Centers

HITECH established a network of RECs to provide technical assistance and other services to support certain provider segments in adopting EHRs and achieving meaningful use. While all types of providers are eligible for REC services, the federal government has subsidized services to providers in a number of different settings, including solo, small and safety net practices, community clinics, rural health centers and critical access hospitals. Collectively, these providers are known as priority primary care providers.

REC funds were awarded through a competitive process administered by the Office of the National Coordinator for Health IT, and cooperative agreement funds were awarded in three rounds.

California received four awards, although two of them went to CalHIPSO, which serves counties in both Northern and Southern California and operates as a unified organization. The other two California-based RECs are:

In addition, the National Indian Health Board was awarded $15.6 million to provide services to 3,000 providers in 35 states, including California.  Among the 564 federally recognized tribes, 102 are located within the state; however, a specific allocation across states or among tribal health facilities is not available.

In terms of service delivery, CalHIPSO made the policy choice to designate a number of Local Extension Centers (LECs), to coordinate REC services in local communities. LECs may be local clinic consortia, regional medical societies, health plans, or other groups that can provide the required technical assistance. CalHIPSO is subcontracting with 10 LECs:

To date, CalHIPSO has awarded funds ranging from a low of $522,000 to the Central Valley Collaborative to a high of $3.9 million to the Health Services Advisory Group.

Health IT Work Force

To further support health IT activities, ARRA allocated $500 million in funding for various work force initiatives. On April 2, 2010, ONC awarded a total of $144 million to a broad range of educational institutions. Among other investments were those to support the education and training of future health IT professionals.

The Community College Consortia Program (CCCP) was funded through these efforts. The CCCP uses a regional approach, supporting five grantees across the nation as they establish multi-institutional consortia within their respective regions. Each college will establish short (less than six months in duration), non-degree training programs in health IT.

California community colleges are part of the Western Regional Health IT Consortium, which received $5.4 million. Of that amount, $3.09 million has been subcontracted to California community colleges thus far. The Consortium’s goal is to train 4,200 health IT workers by 2012. 

In addition to four colleges located in Arizona, Hawaii and Nevada, the following 10 California community colleges will develop programs as part of the Consortium:

On Monday, Part Two of this two-part issue brief will focus on health information exchange, the Beacon Community Program, Broadband, Telehealth and Distance Learning, and investments in Federally Qualified Health Centers.

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